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Reshaping Nokia Technologies

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Oct. 6 2017, Published 2:02 p.m. ET

Network sales down 5%

Nokia (NOK) is remodeling its Nokia Technologies unit as it bets on this business to turn around its financial fortunes at this time of lackluster demand for network gears.

Nokia’s core networks unit registered a 5.0% sales decline in 2Q17, a consequence of weak demand for network equipment as network operators in key markets are nearly through with the upgrade to 4G LTE. Competition from Ericsson (ERIC), Cisco Systems (CSCO), and China’s (MCHI) Huawei also weighed on Nokia’s networks business.

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Nokia Technologies sales up 90%

However, Nokia Technologies, the division that deals in patent sales and licensing, could be a saving grace. As we can see in the chart above, sales in this division rose 90% year-over-year to 369 million euros in 2Q17. Profits in the division also rose 158% year-over-year.

Nokia is doing everything possible to give its technologies unit the support it needs to succeed. Recent actions to strengthen Nokia Technologies include the hiring of a highly experienced leader for the unit and entering into a wide-ranging patent agreement with Xiaomi—a Chinese smartphone maker.

Tripartite deal with Xiaomi

In June this year, Nokia tapped former Samsung (SSNLF) executive Gregory Lee as the chief executive of Nokia Technologies. Note that Lee worked for Samsung for 13 years. He was the head of Samsung’s North America business just before he decamped to work for Nokia. Lee brings tremendous experience and perspective that could help Nokia Technologies make more money from its existing portfolio of patents and innovate more rapidly.

With Xiaomi, Nokia entered into a tripartite deal covering patent licensing, patent sales, and network equipment sales.

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